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Nothing is Impossible in Indonesia, Says Investment Chief

June 28, 2007

By Ian Timberlake
Agence France-Presse

SINGAPORE ~ Indonesia is open for business, the chairman of the country’s investment board told the World Economic Forum on East Asia this week.

Muhammad Lutfi told global business leaders the country has moved to address concerns about corruption, red tape and legal uncertainty while opening its doors to foreign investors and seeking to end its reliance on commodity exports.

He bombarded delegates with a series of economic data on the country’s improving economic condition and said the government aims to reduce poverty to about 17 million people in 2009, from close to 56 million today.

“In order to reach this, the Indonesian economy needs to grow around 6.6 percent average. And in order to get 6.6 percent average it needs investment around US$426 billion from 2004 to 2009,” said Lutfi, chairman of the Investment Coordinating Board (BKPM).

Government spending in the world’s fourth most populous nation would constitute only a fraction of that $426 billion, Lutfi told a luncheon gathering at the forum on Monday attended by about 300 business leaders and government officials.

“Because of that, it needs to change its mindset. The government needs to change its mindset. Indonesia will be a government that is pro-business,” he said.

“Because we understand the business created economic growth. Economic growth will create jobs, then these jobs will fight poverty, and with fighting poverty we will deliver prosperity and that will be the essence of democracy…”

The government has a target of 6.3 percent economic growth this year and first-quarter expansion hit 6 percent, which Lutfi said beat all expectations.

He said domestic and foreign investment rose 27 percent year-on-year in the first quarter of 2007, interest rates were at their lowest level since 2004, inflation had dropped markedly and unemployment was also seen falling further.

Since the election of President Susilo Bambang Yudhoyono in late 2004 the Jakarta bourse has soared and is now “one of the most robust stock exchanges in the world,” Lutfi said.

Nine years after the downfall of former president Suharto, whom Indonesians accused of “corruption, cronyism and nepotism,” Indonesia has struggled to overcome an international reputation for legal uncertainty, bureaucratic red tape and corruption.

The country was a laggard in recovering from a financial crisis that hit the region 10 years ago.

Analysts have warned Indonesia needed to improve its investment climate and reduce its reliance on commodity exports to achieve its growth target.

Lutfi said Yudhoyono’s government was addressing all of those concerns.

“We’ve been doing a lot in tackling, and emphasis on, transparency and accountability,” Lutfi said.

Corruption-fighting measures had saved the country about $43 billion up to 2006, he said.

Indonesia was also moving to smooth out the processes of setting up and running businesses so it “will be comparable if not better to countries like Vietnam and hopefully will be in competition with Malaysia and Thailand.”

A new investment law passed this year treated domestic and foreign businesses equally, he said.

Noting complaints about legal certainty, he said the investment law stated the government would uphold decisions made by international arbitration.

“This is something new…” he said.

“I will assure you that we will uphold the contracts and the sanctity of the contracts.”

The country’s decayed infrastructure has hindered competitiveness but spending on those projects was at a 10-year high and would rise further, Lutfi said.

Indonesia was also moving away from simply selling its many raw materials, he added.

“We would like to sell at least a half-finished good.”

Lutfi said he knew the vast archipelago nation was not perfect.

“People have been saying that nothing is easy in the country, but I can assure you of one thing: Nothing is impossible in Indonesia.”

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